Sharing Economy Clashes with Local Government, Small-Business Owners

Small-business owners are starting to feel threatened by companies that bypass traditional commerce methods and go straight to the customer.

When peer-to-peer “sharing” sites like Airbnb and Lyft first launched, they seemed like novel ideas but with limited practicality. After all, who would want to catch a “Lyft” from a complete stranger or rent out a room in someone’s home?

Millions of people, it turns out.

Airbnb published a report last fall claiming it contributed $632 million in one year to New York City’s economy; the site also recently struck a deal to provide its listings on Expedia. Lyft reported that it had more than 100,000 registered users last summer, and its user base has likely grown greatly since its expansion into several new cities. These are all signs that sharing is not just a passing fad.

But the growth of the “sharing economy” is taking a toll on local economies and its hurting traditional small businesses, like bed-and-breakfast owners and taxi drivers. It’s also pressuring local governments, who have a hard time collecting taxes from sharing services, to take action.

The Seattle City Council is considering controversial measures that would impose caps on rideshare vehicles to 300 to 600 per year and require them to carry commercial insurance. Companies like Uber, Sidecar and Lyft have thousands of independent drivers on the roads and say such a move would effectively put them out of business in Seattle. Critics of the proposal say the city shouldn’t be passing rules that prop up an older business model—taxi drivers, in this case—while hurting an emerging one.

“Ride-sharing quickly gained a following because it keeps more cars off the road and gives drivers a chance to make a living with an asset they already own,” The Seattle Times said in an editorial against the proposal. “Like the taxi industry, many drivers for these new services are immigrants. The council should beware of picking winners and losers.”

More than 12,500 people, including rapper Macklemore, have signed a petition called Save UberX in Seattle pleading with the city to not impose limits on the ridesharing industry. (UberX is a low-cost driver option available through the company's app.)

Taxi-cab drivers in cities with a growing rideshare market are also pressuring their local governments to take action. They say it’s unfair that rideshare drivers don’t have to carry as much insurance, pay taxes, and can raise or reduce their rates depending on demand.

The growing clash between small-business owners, local governments and sharing services is unlikely to fade away quickly. Sharing is a new economic model, and one that seems here to stay.